Specialist property lender Octopus Property has teamed up with the finance arm of auctioneer Acuitus to launch the UK’s first bridging lender for commercial auction purchases.
The pre-approved bridging loan product will be offered to investors who buy at Acuitus auctions, starting with its first sale of 2018 on 14 February.
The product is designed to address the mismatch between the time required for an investor to complete an auction purchase and the time taken for a traditional loan to be approved.
Octopus Property will provide a 50% loan-to-price bridging loan, based upon the price paid at auction, for properties that sell for £500,000 or more. No further valuation will be required, saving borrowers around £3,000-£5,000 in valuation costs.
The legal process has also been simplified to remove the need for a full report on title. Octopus will instead put in place title indemnity insurance with insurer Titlesolv. The streamlined process will ensure auction buyers can complete in the four-to-six week window needed for auctions.
This is thought to be the first time a major auction house and leading real estate lender have partnered in the UK in this way.
Ludo Mackenzie, head of commercial property at Octopus Property, said he had first met Acuitus founders Richard Auterac, Peter Cunliffe and Charlie Powter when they overlapped at Jones Lang Wootton (now JLL) more than 20 years ago. “I know how thorough their due diligence is and the quality of their client base and the assets they sell,” he said.
Acuitus sells more than £300m of primarily investment-grade, high-quality UK commercial property assets each year to established private investors. Its buyer type is typical of the Octopus Property client base, Mackenzie said.
Octopus Property, part of Octopus Group, has an £800m property loan book and aims to expand this to £1.2bn over the next 12 months by offering fast, transparent lending.
Mackenzie approached Acuitus about a lending idea at MIPIM last year. “When something sells at auction it is the closest you can get to open market value,” he said. “You have a willing buyer and a willing seller in an arm’s length transaction. Therefore you don’t need a valuation, which is often the slow element of a bridging loan, especially at busy times.”
He added: “I don’t think we are taking a big leap at all. It would be incredible for a valuer to come to a different number to that achieved in the room.”
The launch comes as market access to readily available and competitively priced financing remains difficult, as lenders are unwilling or unable to structure loan deals that sit outside the traditional parameters.
Stuart Buchanan of Acuitus Finance said: “This loan product is a major step forward in terms of streamlining the auction buying process for investors. Once an auction purchase is complete, Acuitus Finance can then advise on the best options available to refinance an asset on a long-term investment loan.”
Octopus’s loan terms
■ Minimum loan: £250,000
■ Maximum LTV: 50% / up to 65% with further normal underwriting
■ Interest: 0.9% per month
■ Arrangement Fee: 1% / No exit fee
■ Term: six months
■ Minimum interest period: 1 month
Octopus Property has also introduced a new interest-only, long-term investment loan that can refinance the bridging loan at a reduced fee.
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